Electronic money, or e-money, is the money balance documented electronically on a stored-value card. These cards have micro-processors embedded that can be loaded with a monetary value. Another variety of electronic cash is network money, software that permits the transfer of value on computer networks, in particular the the web. Electronic funds are a floating claim over a private bank or another financial institution which is not linked to any particular bank account.” Samples of electronic digital money are bank deposits, electronic money move, direct pay in, transaction processors, as well as electronic digital currencies.
Electronic money can either be centralized, and then there is actually a central point of control of the money supply, or decentralized, where the control over the money supply may be found from various sources. Electronic money that is decentralized is also identified as digital currencies. The most important variance E-money and digital currencies is the fact that E-money does not affect the valuation on the fiat currency (USD, EUR) it represents, but digital currency just isn’t corresponding to any fiat currency. This means that, all digital currency is Electronic money, but Electronic money is not always digital currency. Many mobile sub-systems have been introduced during the past couple of years including Google Wallet and also Apple Pay.
In 1983, a study paper by David Chaum introduced the concept of digital cash.” In 1990, he founded DigiCash, a digital cash company, in Amsterdam to commercialize the ideas in his research.” It filed for bankruptcy in 1998.”” In 1999, Chaum left this company.
In 1997, Coca Cola offered buying from vending machines using mobile payments.” After that PayPal emerged in 1998.” Other system for example e-gold followed suit, but faced issues because it was utilized by criminals and was raided by US Feds in 2005.” In 2008, bitcoin was introduced, which marked the beginning of Digital currencies.”
Shawn Wikoff talks about the Electronic money Law
Since 2001, the European Union has implemented the E-Money Directive “on the taking up, pursuit and prudential supervision of the business of electronic money institutions” last amended in 2009.” Concerns on the real nature of EU electronic money have arisen, since calls have already been made in connection with the 2007 EU Payment Services Directive in favor of merging payment organizations and electronic money institutions. Such a merger could mean that electronic money is of the same nature as bank money or scriptural money.
In the United States, electronic funds are controlled by Article 4A of the Uniform Commercial Code for wholesale trades and the Electronic Fund Transfer Act for client transactions. Provider’s obligation and consumer’s legal responsibility are controlled under Regulation E.
Uses of electronic money around the world
Hong Kong’s Octopus card strategy: Launched in 1997 as being an electronic purse for public transportation, is considered the most effective and mature implementation of contactless smart cards used for mass transit payments. After only 5 years, 25 percent of Octopus card transactions are unrelated to transit, and accepted by more than 160 merchants.”
London Transport’s Oyster card system: Oyster is a plastic smartcard which could hold pay as you go credit, Travelcards and Bus & Tram season tickets. You may use an Oyster card to travel on bus, Tube, tram, DLR, London Overground and most National Rail services in London.”
Japan’s FeliCa: A contactless RFID smart card, used in a variety of ways such as in ticketing systems for public transportation, e-money, and residence door keys.”
Netherlands’ Chipknip: As an electronic cash system used in the Netherlands, all ATM cards issued by the Dutch banks had value that could be loaded via Chipknip loading stations. For people without a bank, pre-paid Chipknip cards could be purchased at various locations in the Netherlands. As of January 1, 2015, you can no longer pay with Chipknip.”
Belgium’s Proton: An electronic purse application for debit cards in Belgium. Introduced in February 1995, as a means to replace cash for small transactions. The system was retired in December 31, 2014.”
Shawn Wikoff sheds light on Centralized systems:
Many systems-such as PayPal, eCash, WebMoney, Payoneer, cashU, and Hub Culture’s Ven will certainly sell their electronic currency directly for the consumer. Other systems only sell through other digital currency exchangers. The M-Pesa system is useful to transfer money through mobile devices in Africa, India, Afghanistan, and Eastern Europe. Some community currencies, like some local exchange trading systems (LETS) and the Community Exchange System, work with electronic transactions.
Mobile sub-systems/Digital wallets
Quite a few electronic money systems use contactless payment transfer so as to facilitate simple and easy payment and provides the payee more confidence in not letting go of their electronic wallet during the transaction.
In 1994 Mondex and National Westminster Bank provided an ‘electronic purse’ to residents of Swindon
In about 2005 Telefónica and BBVA Bank brought out a payment system in Spain called Mobipay which used very simple short message service facilities of feature telephones suitable for pay-as you go services including cabs and pre-pay phone recharges via a BBVA current bank account debit.
In Jan 2010, Venmo launched as a mobile payment system through SMS, which transformed into a social app were friends can pay each other for minor expenses like a cup of coffee, rent and paying your share of the restaurant bill when you forget your wallet.” It is popular with college students, but has some security issues.” It can be linked to your bank account, credit/debit card or have a loaded value to limit the amount of loss in case of a security breach. Credit cards and non-major debit cards incur a 3% processing fee.”
On September 19, 2011, Google Wallet was released in the US only, which makes it easy to carry all your credit/debit cards on your phone.”
In 2012 O2 (Ireland) (owned by Telefónica)launched Easytrip to pay road tolls which were charged to the mobile phone account or prepay credit.
O2 (United Kingdom) invented O2 Wallet at about the same time. The wallet can be charged with regular bank accounts or cards and discharged by participating retailers using a technique known as ‘money messages’ The service closed in 2014
On September 9, 2014 Apple Pay was announced at the iPhone 6 event. In October 2014 it was released as an update to work on iPhone 6 and Apple Watch. It is very similar to Google Wallet, but for Apple devices only.”
GNU Taler is an anonymous, open source electronic payment system currently (September 2015) in development.
The consultant Shawn Wikoff explains Decentralized systems
Cryptocurrencies allow electronic money systems to be decentralized, systems include:
Bitcoin, a peer-to-peer electronic monetary system based on cryptography.
Litecoin, originally based on the bitcoin protocol, intended to improve upon its alleged inefficiencies.
Ripple monetary system, a monetary system based on trust networks.
Dogecoin, a Litecoin-derived system meant by its author to reach broader demographics.
Nxt, conceived as flexible platform to build applications and financial services around.
Hard vs. soft electronic currencies
A hard electronic currency is one that does not have services to dispute or reverse charges. In other words, it is akin to cash in that it only supports non-reversible transactions. Reversing transactions, even in case of a legitimate error, unauthorized use, or failure of a vendor to supply goods is difficult, if not impossible. The advantage of this arrangement is that the operating costs of the electronic currency system are greatly reduced by not having to resolve payment disputes. Additionally, it allows the electronic currency transactions to clear instantly, making the funds available immediately to the recipient. This means that using hard electronic currency is more akin to a cash transaction. Examples are Western Union, KlickEx and Bitcoin.
A soft electronic currency is one that allows for reversal of payments, for example in case of fraud or disputes. Reversible payment methods generally have a “clearing time” of 72 hours or more. Examples are PayPal and credit card. A hard currency can be softened by using a trusted third party or an escrow service.